Question

If the price change causes total receipts to move in the opposite direction from the price...

If the price change causes total receipts to move in the opposite direction from the price change, demand must be _______.

Group of answer choices

A unit elastic

B inelastic

C elastic

Homework Answers

Answer #1

The correct answer is 'Option C'.

The total revenue is measured by the total receipts. When the demand is elastic, the percentage change in quantity demanded is more than the percentage change in price. So, a fall in price leads to a more proportionate increase in quantity demand which causes an increase in the total revenue and an increase in price leads to a more proportionate fall in the quantity demanded which causes the total revenue to fall. So, the total receipts and price are inversely related to each other when the demand is elastic. Therefore, the correct answer is 'Option C'.

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